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TipRanks’ Data Suggests Optimism Ahead of Fourth Quarter
TipRanks Labs

TipRanks’ Data Suggests Optimism Ahead of Fourth Quarter

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2022 was marred by a slew of macroeconomic headwinds including high inflation, interest rate hikes, the War in Ukraine, the bear market, and supply chain issues. As we enter the last quarter of the year, here’s what TipRanks’ data indicates about the overall market sentiment.

The September quarter of 2022 is more than halfway through. The majority of companies have reported their second quarter results and have delivered much better performances compared to the first quarter of 2022. This infuses positivity heading into the last lap of the year. Hopefully, the worst of all macroeconomic headwinds are behind us, with both corporates and customers getting accustomed to them.

Current data points from TipRanks suggest less uncertainty and more optimism compared to earlier in the year. Let us have a look at what TipRanks’ data indicate ahead of the fourth quarter.

1) Here’s what Q2 Earnings Results Indicated

As per TipRanks’ data, there was a significant improvement in the percentage of companies that beat Wall Street expectations compared to the previous quarter. Notably, in Q2, 65% of companies tracked by TipRanks exceeded analysts’ earnings per share (EPS) estimates while 33% missed.

This was also supported by the fact that analysts across the Street had lowered their second-quarter expectations for companies after witnessing a dreadful Q1 performance, during which, a majority of companies had failed to meet or beat analyst forecasts for the first time in five years.

Remarkably, the Consumer Goods sector had the most noteworthy performance in Q2, with 69% of the companies beating analysts’ forecasts. This suggested that despite the record-high inflation rates and increased cost of borrowing, customers were willing to spend.

Moreover, TipRanks’ data showed that there was an increase in the number of visitors to both low-cost and luxury retailers’ websites in Q2. Strangely enough, Healthcare companies had the worst performance with 44.5% of companies missing expectations.

2) Insiders are Bullish on the Financial Sector

Corporate insiders usually start accumulating company shares well ahead of time. For example, a current positive insider signal indicates that the company is expected to deliver solid performance in the near future.

The leader in the race is the Financial Sector with the biggest Buy to Sell ratio. In Q3, corporate insiders in the Financial sector bought 1.63 shares for every share they sold.

However, at the start of 2022, corporate insiders were highly bullish about the Basic Materials sector. This was the only sector where insiders bought more stocks than they sold at the beginning of the year. This trend continued into the third quarter as well.

Notably, the Financial, Healthcare, and Basic Materials sectors are all witnessing a positive insider signal. The optimism of insiders indicates that these three sectors are poised for larger gains in the final quarter of the year.

On the contrary, the Consumer Goods sector has the lowest Buy to Sell ratio in Q3, with insiders buying only 0.5 shares for every share they sold.

3) Analysts are Giving More Buy Recommendations

Interestingly, 2022 marks the first time in the past three years that analysts have decreased their overall price targets on stocks more than they have increased them. A similar trend continued in Q3, with 57% of analysts reducing their price targets on stocks.

Per TipRanks’ data, the Basic Materials sector saw the highest price target decline, with 65% of analyst ratings accompanied by a reduction in price targets.

On the other hand, the Utilities Sector is the only one where over 50% of analyst ratings were accompanied by price target increases.

Overall, of all the companies tracked by TipRanks, 61% of analyst ratings were Buy in Q3, as compared to 60% Buy ratings in 2021 and 57% Buy ratings in 2020. The inclining trend in the overall Buy recommendations makes us believe that we are returning to a bull market analyst sentiment, despite the reduced price targets.

Parting Thoughts

To sum it up, TipRanks’ data points suggest that both corporate insiders and analysts are becoming increasingly optimistic about certain sectors compared to the start of 2022. Moreover, macro factors are also showing improving trends. All these indicate that the second half of 2022 is surely going to be better for both companies and shareholders.

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